Wednesday, May 23, 2007

The Toyota Way

Russ Scaffede was the vice president of Powertrain for Toyota when it launched the first American powertrain plant in Georgetown, Kentucky. He had worked decades for General Motors and had excellent reputation as a manufacturing guy who could get things done and worked well with people. He was excited about the opportunity to work for Toyota and to help start up a brand-new plant following state-of-the-art TPS principles. He worked day and night to get the plant up to the demanding standards of Toyota and to please his Japanese mentors, including Fujio Cho, who was president of Toyota Motor Corporation in Kentucky.

Scaffede had learned the golden rule of automotive engine production: do not shut down the assembly plant! At General Motors, managers were judged by their ability to deliver the numbers. Get the job done no matter what – and that meant getting the engines to the assembly plant to keep it running. Too many engines, that was fine. Too few, that sent you to the unemployment line.

So when Cho remarked to Scaffede that he noticed he had not shut down the assembly plant once in a whole month, Scaffede perked up: “Yes sir, we had a great month, sir. I think you will be pleased to see more months like this.” Scaffede was shocked to hear from Cho:

“Russ-san, you do not understand. If you are not shutting down the assembly plant, it means that you have no problems. All manufacturing plants have problems. So you must be hiding your problems. Please take out some inventory so the problems surface. You will shut down the assembly plant, but you will also continue to solve your problems and make even better-quality engines more efficiently.”

When I interviewed Cho for this book, I asked him about differences in culture between what he experienced starting up the Georgetown, Kentucky, plant and managing Toyota plants in Japan. He did not hesitate to note that his number-one problem was getting group leaders and team members to stop the assembly line. They assumed that if they stopped the line, they would be blamed for doing a bad job. Cho explained that it took several months to “re-educate” them that it was a necessity to stop the line if they want to continually improve the process. He had to go down to the shop floor every day, meet with his managers, and, when he noticed a reason to stop the line, encourage the team leaders to stop it.

-Jeffrey K. Liker, “The Toyota Way”

From this short excerpt, we can learn quite a few of Toyota’s business philosophies and operations practices.

First and foremost, we can see Toyota’s emphasis on quality. In General Motors, managers avoided shutting down the assembly line because this would cause production to slow down. In Toyota, however, they were willing to sacrifice numbers for quality.

In most manufacturing plants, quality control inspection is usually done on finished goods. In Toyota, team leaders stopped the assembly line when they noticed a quality glitch, and fixed it immediately. They wanted to get quality right the first time.

The instruction to stop the line came from the team leaders, not the plant manager. This was another philosophy at work: employee empowerment.

Cho told Scaffede to “take out some inventory.” This is because inventory hides problems. When inventory level goes down, the problems are exposed. Toyota strives to lower inventory level as it adopts the Just-in-time (JIT) strategy.

wah.. u study management is it?? recall back my lecture talked about the company when study marketing or management class...hehe, i so interest on it when lecture told us those examples... won't make me bored on the class...welcome to my blog and thanks for droping...